Stocks pulled back with the Dow closing down 91 points to trade near 17,434.Trading volume was high and the stock rally continues to be under pressure. The Dow is now negative for the year.
The Federal Reserve released the notes of its last FOMC meeting and contained within them was a clear indication that a rate hike in June is on the table “IF” recent economic data in the US continues to hold steady. The news shocked global investors since they were betting heavily that rates would stay unchanged until later this year. US economic data the past two quarters has been subdued but recent numbers paint a brighter picture and the Fed is paying close attention.
Market reaction to the rate news shows a difference of opinion betwixt the investment world and the Federal Reserve. This is evidenced by utilities moving higher today while banks moved lower. If it is a lock that rates will be increased in June (and it could be) then banks should have been higher. Patience is required in this period leading up to the June meeting as it appears volatility might increase.
Wal-Mart reported earnings which, while they were 5% lower than this time last year, managed to beat estimates as US sales comps were strong enough to offset weak international sales and currency headwinds. Revenue was up 1% beating estimates. . The company continues to spend heavily on e-commerce and wage initiatives and its forward guidance called for flat profits and continued modest sales gains. Shares of Wal-Mart and other retailers were higher on the news.
Gold was down on the rate hike news but in another interesting divergence, shares of several gold miners reversed higher today indicating that investors were using weakness to go long. Gold closed down $19 an ounce to $1,255.